California to Require Solar Panels on New Homes

On Wednesday, the state of California became the first state in the country to establish a mandate that requires almost all new homes to be equipped with solar panels.

The new rule, approved by the California Energy Commission, applies to all new homes, condos, and apartment buildings up to three stories tall that obtain building permits after January 1, 2020. Currently, only 15% – 20% of new single-family homes in California are affixed with solar panels.

Certain exemptions to the rule would apply, such as homes that are in heavily shaded areas or homes with limited rooftop surface area to accommodate solar panels. Additional offsets will be available for builders installing solar batteries, which would allow the solar panel capacity requirement to be reduced.

Photo Source: NPR

The move by California is a watershed moment in the solar industry. Given its stature and role as the leading state for solar capacity, California plays an outsized role in dictating where the U.S. solar market goes. Quite simply, as goes California’s solar industry, so goes the nation. California’s solar mandate for new housing construction will surely have positive effects on making solar a more affordable and mainstream energy source for the broader domestic market.

While California’s new solar mandate is a first of its kind statewide initiative, the city of San Francisco implemented a similar provision in 2016 that went into effect this January. The city ordinance requires some form of solar energy – either solar panels or solar heating units – to be affixed on all new buildings that are 10 stories or fewer. The effort in San Francisco was led by then-San Francisco Board of Supervisors member, Scott Wiener, who subsequently went on to lead the push for a similar statewide policy once elected to the state Senate.

Cost Concerns in Context

California’s new solar mandate raises reasonable concerns about the impact it will have on the affordability of housing, especially for a state suffering a serious and deepening housing affordability crisis.

However, as with most any residential solar investment, the upfront costs that the mandate will add to new home construction will be dwarfed by the long-term cost savings that will be passed onto the homeowner. The California Energy Commission projects that the mandate would add about $9,500 to the initial cost of building a house, but long-term energy savings could total $19,000 over 30 years.

“We do not minimize the cost of housing in the state — everyone recognizes that’s an issue. Their cash-flow position will be improved with the addition of solar. It won’t make it worse.”

The Commission estimates that buyers of new solar-equipped homes on average would see a $40 hike in their monthly mortgage payments, while their monthly utility bills would decline by $80.

Cost estimates from private developers are even more bullish about the potential savings that homeowners will realize over the long haul. Meritage Homes, a housing developer with a significant presence in California, estimates that the new energy standards will add $25,000 to $30,000 to home construction costs. However, they also estimate that homeowners will realize $50,000 to $60,000 in reduced operating costs over the 25-year life of the home’s solar energy system.

From the homeowners’ perspective, there is a lot to be said about installing a solar energy system during the initial home construction process rather than years down the road. Doing so is both more convenient and cost-effective. As the San Francisco solar ordinance outlines:

“Requiring solar water heating and/or solar photovoltaics at the time of new construction is more cost-effective than installing the equipment after construction, because workers are already on-site, permitting and administrative costs are lower, and it is more cost-effective to include such systems in existing construction financing.”

California’s latest move to make solar a mainstream energy source for more of its residents serves as a reminder of the leadership position that California has assumed on all things solar, over the years. If the past is any precedent, expect other residential solar mandates to pop up around the country as the other 49 states once again follow California’s lead.